Mary Lynn Cesar, Kapitall: Joe Biden wants "more people, goods and information…” from Mexico. Do these rallying stocks qualify?

Last week, Vice President Joe Biden went to Mexico to meet with President Enrique Peña Nieto and launch the inaugural US-Mexico High Level Economic Dialogue (HLED). First announced in May 2013, the annual cabinet-level exchange aims to “advance strategic economic and commercial priorities central to promoting mutual economic growth, job creation, and global competitiveness.”

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Annual trade between the US and Mexico currently amounts to $500 billion, or over $1.25 billion a day. Vice President Biden spoke about the countries’ economic partnership during his visit, stating that the controversial North American Free Trade Agreement (NAFTA) led to the quadrupling of two-way trade between the two nations. HLED plans to build upon that relationship through targeted work under three pillars:
  • partnering for regional and global leadership
  • promoting competitiveness and connectivity
  • fostering economic growth, productivity, entrepreneurship, and innovation.

Contraction, reforms, growth

Economic growth has been a challenge for Mexico so far this year, and the Finance Ministry has cut the country’s growth forecast twice over the past four months.
  • In May the growth outlook was revised to 3.1% from 3.5% following weak growth and low exports in Q1.
  • Then it was lowered to 1.8% in August after the economy shrank by 0.74% in Q2. 
  • This was the country’s first contraction in four years.

Mexico’s first half GDP growth is in line with the situation the Organization for Economic Co-Operation and Development (OECD) described in its May economic outlook. In addition to expecting a weak first half, the OECD wrote that amidst improving financial conditions and a strengthening US recovery, “growth is projected to firm up going into 2014.”

The international economic body considers President Peña Nieto’s economic reforms as part of Mexico’s improving financial landscape. Since entering office in December, President Peña Nieto has signed into law an overhaul of the telecommunications and broadcast industries that promotes competition and investment, and provide Mexicans with increased access to those services.

President Peña Nieto has also introduced energy and  tax reforms, which the OECD commended despite being unaware of the details: “The administration’s ambitious structural reform program – which includes telecommunications, energy and fiscal reforms – will raise sustainable long-term growth prospects.”

Investing ideas

While President Peña Nieto’s reforms are promising for future growth, the status of the country’s short term growth is less clear. This inspired us to look for companies that are presently performing well with indicators of upside potential.

To begin, we constructed a universe comprised of Mexican stocks traded on US exchanges. We then screened for stocks that are rallying above their 20-day, 50-day, and 200-day moving averages (MA), which indicates that these stocks have strong upward momentum.

Next, we decided to incorporate a metric that analyzes past performance, in order to give some context for the stocks’ upward momentum. By screening for stocks that have outperformed over the last quarter, with over 15% return, we’ve isolated the firms that have done well in the past and may continue to do well.

We were left with four stocks on our list.

Click on the interactive chart below to see data over time. 

Do you believe these stocks have upside potential? Use this list as a starting point for your own analysis.

1. Maxcom Telecomunicaciones S.A.B. de C.V. ( MXT): Provides voice and data services to residential and small and medium-sized business customers in Mexico.

Market cap at $321.57M, most recent closing price at $2.87.

Performance over the last quarter at 61.93%.

The stock is currently rallying 3.78% above its 20-day MA, 4.35% above its 50-day MA, and 19.13% above it 200-day MA.

2. Industrias Bachoco S.A.B. de C.V. ( IBA): Operates as a poultry producer in Mexico.

Market cap at $2.1B, most recent closing price at $41.25.

Performance over the last quarter at 30.95%.

The stock is currently rallying 3.89% above its 20-day MA, 1.76% above its 50-day MA, and 23.35% above it 200-day MA.

3. Gruma S.A.B. de CV ( GMK): Engages in the production, marketing, distribution, and sale of tortillas, corn flour, wheat flour, and related products.

Market cap at $3.18B, most recent closing price at $22.75.

Performance over the last quarter at 29.48%.

The stock is currently rallying 2.48% above its 20-day MA, 7.00% above its 50-day MA, and 30.85% above it 200-day MA.

4. Grupo Televisa, S.A.B. ( TV): Operates as a media company in Mexico and internationally.

Market cap at $16.22B, most recent closing price at $28.28.

Performance over the last quarter at 24.81%.

The stock is currently rallying 3.95% above its 20-day MA, 4.54% above its 50-day MA, and 7.24% above it 200-day MA.



( List compiled by Mary-Lynn Cesar, a Kapitall contributor. Quarterly sales data sourced from Zacks Investment Research. All other data sourced from Finviz.)